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When You Should Worry About Insider Selling

Rarely should investors worry about insider selling, says Fool contributor Tim Beyers in the following video. Why? Because most of the time, sales reported in the headlines don't look nearly so bad once you scan the source documents, or Form 4s, filed with the SEC.

Take Rackspace Hosting (NYSE: RAX) . In November, headlines blared about how CEO Lanham Napier had sold hundreds of thousands of shares when, in fact, he had sold none. What was missing? A closer look at the Form 4s, Tim says, which had been amended after an initial filing.

Rather than bailing out of his position, Napier exercised three options grants from 2009 that were set to expire at the end of 2015. He then sold at about $42 a share. Napier still directly controls more than 880,000 shares of Rackspace stock and is managing general partner for HBSA, which owns more than 3.6 million shares of Rackspace stock as of this writing. He has as much to gain (or lose) as common shareholders, which is what you should want as an investor and part-owner.

Unsure whether the CEO of a stock you own is aligned with your interests? Check the Form 4s and report what you find in the comments box below. Or you can list a ticker and ask Tim to take a look. He'll be talking more about insider buying and selling in the weeks to come.

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Tim Beyers first began writing for the Fool in 2003. Today, he's an analyst for Motley Fool Rule Breakers and Motley Fool Supernova. At Fool.com, he covers disruptive ideas in technology and entertainment, though you'll most often find him writing and talking about the business of comics. Find him online at timbeyers.me or send email to tbeyers@fool.com. For more insights, follow Tim on Google+ and Twitter.